Question

1)The marginal social cost is A. the same as the marginal external cost. B. equal to the marginal private cost minus the marginal external cost. C. the same as the marginal private cost. D. equal to the marginal private cost plus the marginal external cost.

2)

The difference between the marginal social cost and the marginal private cost equals the

A.cost of producing an additional unit of a good.

B.marginal external cost.

C.marginal external benefit.

D.marginal private benefit.

3)

If the marginal social cost of a good equals the marginal private cost of the​ good, then the marginal external cost of of the good

A.

is zero.

B.

equals the marginal social cost.

C.

equals the marginal social benefit.

D.

equals the marginal private benefit.

4)

When production of a good results in an external​ cost, the unregulated competitive market equilibrium is inefficient because​ ________.

A.

MSC​ = MC

B.

MSC​ > MSB

5)

If production of a good creates an external​ cost, the amount of output where the marginal social benefit equals the marginal private cost is

A.

inefficient.

B.

inequitable.

C.

unattainable.

D.

efficient.

6)

he efficient quantity of output of a product with external costs of production is

A.

zero.

B.

where the marginal social cost curve and marginal social benefit curve intersect.

C.

as low as possible.

D.

where the demand curve and the​ producer's supply curve intersect.

C.

MSC​ = MSB

D.

MSC​ < MSB

Answer 1

1. The marginal social cost is equal to the marginal private cost plus the marginal external cost . MSC= MPC+ MEC. Hence, option(D) is correct.

2. The difference between the marginal social cost and the marginal private cost equals the marginal external cost . MSC-MPC =MEC . Hence, option(B) is correct.

3. If marginal cost of a good equals the marginal private cost of the good, then the marginal external cost of the good is equal to zero. Hence, option(A) is correct.

4. When production of a good results in an external​ cost, the unregulated competitive market equilibrium is inefficient because​ MSC>MSB, marginal social cost lies above marginal private cost in case of external cost which results in marginal social cost is greater than marginal social benefit at market equilibrium and MSC=MSB at socially efficient output. Hence, option(B) is correct.

5. If production of a good creates an external​ cost, the amount of output where the marginal social benefit equals the marginal private cost is inefficient , because the efficient outcome is where marginal social benefit equals marginal social cost. Hence, option(A) is correct.

6. The efficient quantity of output of a product with external costs of production is where the marginal social cost curve and marginal benefit curve intersect. i.e MSC=MSB. Hence, option(B) is correct.